Impact of Variation Orders on Construction Projects

Research Project
i

TABLE OF CONTENTS
Acknowledgements............................................................................................................................iv
CHAPTER 1 INTRODUCTION...................................................................................................1
1.1 Background...................................................................................................................................1
1.2 Problem statement........................................................................................................................1
1.3 Hypotheses.....................................................................................................................................2
1.4 Aim and Objectives.......................................................................................................................2
CHAPTER 2 LITERATURE REVIEW.......................................................................................3
2.1. Introduction.............................................................................................................................3
2.2. Definition..................................................................................................................................3
2.3. Type of Variation....................................................................................................................4
2.3.1. The parties to initiate Variation Order..........................................................................4
2.3.2. Nature of the variation....................................................................................................5
2.3.3. Beneficial variation orders..............................................................................................5
2.3.4. Detrimental variation orders..........................................................................................5
2.4. Factors Influencing the Variation..........................................................................................5
2.4.1. General Related Changes................................................................................................6
2.4.2. Client related changes......................................................................................................7
2.4.3. Contractor related changes.............................................................................................8
2.5 The Implication of Variations Order..........................................................................................9
CHAPTER 3 Research Methodology..........................................................................................14
3.1. Introduction...........................................................................................................................14
3.2. Research Process...................................................................................................................14
3.3. Research Design....................................................................................................................15
3.3.1. Research approach........................................................................................................15
3.3.2. Strategy of inquiry.........................................................................................................16
3.4. Research techniques..............................................................................................................16
3.4.1. Data collection techniques............................................................................................16
3.4.2. Preliminary survey........................................................................................................17
3.4.3. Main questionnaire survey...........................................................................................17
3.4.4. Determining the sample size.........................................................................................18
3.4.5. Sampling technique.......................................................................................................18
3.4.6. Data analysis technique.................................................................................................18
3.5. Summary................................................................................................................................18
CHAPTER 4 - Data Analysis and Interpretation..........................................................................20
CHAPTER 5 – Discussion of Findings............................................................................................31
ii

CHAPTER 6 – Recommendations and Limitations......................................................................33
CHAPTER 7 – Conclusion and Reflection.....................................................................................35
List of References..............................................................................................................................37
Appendix............................................................................................................................................39
iii

Acknowledgements
First and foremost, I would like to express my sincere gratitude to my advisor ......, for the
useful comments, remarks, guidance and engagement through the learning process of this
research.
My sincere thanks also go to my colleagues and friends cooperated in the supply of valuable
documents and sharing their experience.
Most importantly none of this could have happened without the endless love and support of
my parents. Likewise, I would like to say thank you to my family for their kind-heartedness
and continuous care.
iv

CHAPTER 1 INTRODUCTION
1.1 Background
A contract is a agreement between two or more parties and that will change. Contractual
provisions related to modifications allow contract parties to voluntarily initiate variation
orders within the framework of the activity without modifying the initial contract.
Modifications, additions, omissions, and substitutions in terms of consistency, quantity, and
work schedule are forms of variation orders. According to (Wainwright & Wood, 1983),
without contractual clauses, the construction contractor will be required to promise to
construction the building as per the drawings and described in the bills for a contract amount.
Any small improvements that the client or his/her engineer desired to make later would
necessitate the termination of the contract and the development of a new one.
(Willis & Willis, 1980) explained that, after a contract is signed, the condition cannot be
amended if not includes clauses for modification, and even only permissible changes are
expressly specified under the contractual terms. A provision providing for variance of works
is an integral part of any building contract and without it, the contractor is not obligated to
perform extra work or make omissions or adjustments Uff (2005). (Wainwright & Wood,
1983) have explained that, the customer has the right under contractual terms to change the
scope and quality of the contractor's results. In addition, according to (Finsen, 2005), the
contractor shouldn’t fail to carry out the varying duty, with the only recourse being an
increase in the amount to be charged for the performance, and, under appropriate cases, an
extension of time in which to carry out that performance. According to Ssegawa, Mfolwe,
Makuke, and Kutua (2002), the variation in which orders are granted is permitted by the spirit
to proceed without compressing another contract to complete the contract changes.
1.2 Problem statement
The research problem may be stated as follows:
Variation orders on construction activities have the potential to raise construction
costs unnecessarily without adding value to the project, in which case they can be considered
waste, and identifying their causes can contribute to their reduction, exclusion, and eventual
improvement in overall project efficiency.
1

1.3 Hypotheses
The hypotheses to be tested in this study are:
 H1. Variation orders are prevalent on all construction projects
 H2. Variation orders always increase the cost of construction
 H3. All variation orders add value to construction projects
 H4. Variation orders may be regarded as waste
 H5. Variation orders may be eliminated if their causes are identified
 H6. Variation orders negatively affect overall project performance
 H7. The predominant origin agent of variation orders is the client.
1.4 Aim and Objectives
The purpose of this research is to study the impact of variation orders on project performance
and to take proactive measures to reduce them.
To achieve the goal, several objectives are defined, which are as follows:
1. To define the types of variance works that typically exist in the projects, as well as
the reasons that affect them.
2. To identify the issue that affects variance and the consequences of variation to the
construction in order to identify and prioritize the risks.
3. To determine the strategy action that can be taken to eliminate differences
beginning with the preparation stage and continuing into the construction stage.
2

CHAPTER 2 LITERATURE REVIEW
1.1. Introduction
This study includes a detailed literature review that reflects on the possible causes of
variation orders, their consequences, origin agents, and strategies for monitoring potential
variation orders on construction projects.
According to (O'Brien, 1998), the need for improvements on project is a realistic fact. Also,
the most meticulously designed projects can require changes due to a variety of factors.
Similarly, Ssegawa et al., (2002) clarified that the building industry's compartmentalization
has made variance unavoidable feature and became widespread that is impossible to finish a
project without modifications to the design or the construction phase itself.
As a result, (CII, 1994b) state that, variation orders are unavoidable in the projects; the
intention of the owner, designer, or construction team is to limit the amount of such
modifications. Changes in drawings and contract papers nearly invariably result in a
reduction in contract price or contract schedule. Variations, in the past, have created
concerns with all those participating in the building process. Proper deviation order control
is thus critical for all kinds of building projects.
1.2. Definition
Regardless of the most sophisticated project management methods and strategies available,
changes have come to be recognized as an anticipated event of any project. As a result,
researchers have put in a lot of effort to identify, evaluate, and propose suitable strategies
for handling differences in various project environments.
Aa mention in the Association of project management syllabus (2000) very simply
described variation is a “A change in scope or timing of work which a supplier is obliged to
do under a contract”.
Additionally, according to John Molloy (1999) describe a more specific description as "any
alternation of the work, whether by addition, alteration, or omission of the work to be
performed under the contract by the contractor." Those modifications can be covered, but
they are needed but removed from the contract, the work is not required but is included in
the contract, extra work demanded by the client, changes in the writing scope requested by
3

the client, changes in the character or nature of materials or building techniques, and
changes to accommodate site requirements, location, and so on.
Harrell Remodelling Inc (HR) points to the completed work evaluated following work
completion, which can be more or less than the tender's estimated amount. Those changes
are managing as variation order.
Similarly, Clause 51(1) of AACRA’s General conditions of contract provision (MOWUD
Dec 1994), describes variations as alterations, additions or omissions of any part of the
work to the contract documents.
For the purposes of this analysis, variance is specified as any occurrence that outcome in a
formal alteration of the original work, timing of execution, construction methodology
expense, quality or volume of work, as well as contract provisions. Before analysing the
problem, consequences, and controls of variation orders in projects, it is important to
consider the existence of variations and the factors causing the frequency of variation
orders.
1.3. Type of Variation.
There are usually three styles of combinations. Groups of variety can be categorized as per
their parameters and those are listed as follows:
1. The identity of the initiator.
2. The nature of the variation
3. The consequences or effect of the variation.
1.1.1. The parties to initiate Variation Order
A change made by one or more principal parties is classified according to the name of the
initiator. An employer, contractor, nominated subcontractors, nominated vendors, and
contract administrator are all examples of this.
An owner is one who makes decisions on behalf of users, potential occupants, and so on,
while a contractor will make decisions on his own or on behalf of subcontractors,
manufacturers, and so on. Nominated subcontractors/suppliers are in relation to their
4